Chapter 21 - Getting Started In Business Flashcards
What is a sole trader?
A business owned and run by one person. Entrepreneur makes all decisions
What are the advantages and disadvantages of a sole trader?
- Easy to set up
- Keep all the profits
- Decision making
- Confidentiality - don’t have it publish financial accounts
- Unlimited liability - owner personally responsible for debts
- No continuity of existence
- Stress
- Lack of capital
What the cro?
Companies registration office
What does the cro do?
The incorporation of companies (register new companies)
Receipt and registration of relevant documents required to set a business
Making information available to the public
What is a partnership?
A business with between two and twenty partners
What is self assessment income tax?
Tax paid on profits of shareholders in a partnership company
What is a business name?
A trading name that differs from the names of the persons or the Organisation who own the business
What are the advantages and disadvantages of a partnership?
- Easy to set up
- Decision making
- Increased capital
- Confidentiality
- Unlimited liability
- Profits are shared
- Decision making is slow
- Legal entity (the partners can be sued not the business)
What is a deed of partnership/partnership agreement?
A legal agreement signed by all partners that sets out the rules of the partnership on all matters
What is a private limited company?
A form of business that has between 1 and 149 shareholders
What are the advantages and disadvantages of a private limited company?
- Limited liability
- Continuity of existence
- Separate legal entity
- Taxation - pays corporation tax of 12.5% which is less than self assessment income tax
- Expensive to set up
- Profits are shared
- Less confidentiality
- Time - needs a certificate of incorporation to start trading
What is a certificate of incorporation?
The cro receives and processes all relevant documents required to set up a company
What is a co operative?
Type of business that is set up, owned and controlled by members rather than shareholders. Registers with the registry of friendly societies
What are the four types of co operatives?
Producer co operatives
Worker co operatives
Community co operatives
Financial co operatives
What are the advantages and disadvantages of a co operative?
- Limited liability
- Taxation
- Continuity of existence
- Democratic decision making
- Lack of capital
- Registration is complex
- Profits are shared
- Confidentiality
What are 7 factors affecting location of a business?
Employees - access to wide range of suitably qualified staff
Market - access to customers, knowledge of competitors
Local environment - clean, healthy, safe, positive support from community
Raw material - access to raw materials
Government - politically stable government, low corruption
Land - affordable land and buildings available to rent
Infrastructure - well developed transport links, good broadband
Give examples of finance available for start ups.
Short term - bank overdraft, accrued expenses, trade credit
Medium term - medium term loan, hire purchase, leasing
Long term - debenture, grants, equity capital
What are the 3 methods of production?
Job production
Batch production
Flow (mass) production
What is Job production?
Unique item made to consumers specifications, high quality, needs highly skilled staff, high selling price e.g. tailor made clothes
What is batch production?
Limited number of identical items are made in a production run, goods are produced for stock, less skilled workforce, lower selling price e.g. bread
What is a production run?
The machinery in a factory is set up to make one product. When the product is finished, the production run is over and needs to be reset
What is mass production?
Identical items are made continuously, goods made for stock, unskilled employees, low pay, low selling price e.g, pens
What are implication of changing production methods?
Investment - batch and mass require automated machinery so one must invest in it
Finance - more finance needed
Ownership structure - may have to change in order to obtain finance
Changes to stock control - develop a stock control system
Marketing plan - new one made
What is subcontracting/outsourcing?
A business employs another firm to manufacture part of a product
